GLOBAL - Sovereign and Public Pension Reserve Funds (SPFs) have proven an increasingly important and popular method of investing, with global SPF assets worth in excess of $4.1trn in the 2006 fiscal year.
The OECD said the SPFs in New Zealand, Spain and Saudi Arabia had displayed the fastest growth - 45%, 27% and 24% respectively over the 2005-2006 fiscal period - while Norway's SPF had an assets-to-GDP ratio of 83%.
The report identified two clear types of SPF, which it defined as "funds set up by governments or social security institutions to contribute to the financing of pay-as-you-go pension plans."
The first type are "part of the overall social security system" and funded mainly via contribution surpluses. This category includes Denmark's Social Security Fund, the US Social Security Trust Fund and the Japan Government Pension Investment Fund.
The second type, "established directly by the government" and managed separately from the social security system, the report said, were funded through direct government transfers.
This type of SPF, which includes the Australia Future Fund and the New Zealand Superannuation Fund, is usually barred from making payments for several decades and is intended to meet future deficits of the retirement system.
The report also commented that while allocations alternative assets were increasing in popularity, they "still only accounted for a relatively small portion of total asets." As an example, at one end of the scale, the Korean National Pension Fund had only 1.2% of assets in alternatives.
The New Zealand Superannuation Fund, a relatively large alternative investor had 12.7% in the asset class.
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